The price of used cars in Australia continues to soar, hitting new highs for the fourth consecutive month.
According to data from Moody’s Analytics the current wholesale price of used cars is up 32 per cent compared to the same point in 2019, and grew two per cent between September and October.
Analysts are questioning whether the current growth is sustainable.
“Under normal circumstances used vehicles have a maximum price that a consumer should never pay more than, known as the manufacturer’s suggested retail price,” the latest Moody’s Analytics report says.
“Above that price, the consumer should buy a new vehicle rather than a used car or ute. Younger vehicles are testing this upper limit, with the average sales price for one-year-old vehicles coming in at over 90 per cent of MSRP during the past two months.
“This is compared with an average of 72 per cent of MSRP in the five years prior to 2020.”
The reason for the price spike? Fewer people are buying new cars, which means there are fewer trade-ins and used cars hitting the market.
Fleets also aren’t selling their vehicles at the same rate as in 2019, with lockdowns designed to stop the spread of COVID-19 keeping mileage low and allowing them to extend their life compared to the pre-pandemic norm.
Moody’s predicts prices will level out before the end of 2020, and begin to decline into 2021.
“The slowing of growth that has occurred in each of the past two months will continue, and all-time highs will stop being reached by the end of the year as perfunctory limits on growth are reached,” the analytics firm says.
“As the economy continues to recover, prices of wholesale used vehicles will begin to normalise.”
As demand for used cars has jumped, sales of new cars in Australia have plummeted on the back of bushfires, nationwide lockdowns early in the year, and Victoria’s ongoing restrictions.
The year-to-date (YTD) tally for 2020 was 726,111 sales at the end of October, down 18.8 per cent on last year.